21 Days per Year: Years 1 to 5
For each of the first five years of service, the employee accrues 21 days of basic pay. A day's pay is the monthly basic salary divided by 30.
Free tool
UAE Gratuity Calculator
How much end-of-service gratuity is an employee owed in the UAE? Enter the monthly basic salary and length of service below for an instant estimate. The calculator uses the standard statutory formula: 21 days of basic pay for each of the first five years of service, 30 days for each year beyond five, capped at two years' total salary. Below the tool, we explain who qualifies, what counts as basic salary, when gratuity must be paid, and the questions employers ask us most.
Estimated gratuity
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How it breaks down
Estimate only: this uses the standard statutory formula. Actual entitlement depends on the employment contract, free zone rules and MOHRE guidance, and this is not legal advice. We run WPS payroll with gratuity accruals built in.
How it works
The gratuity formula, in plain words
30 Days per Year: Year 6 Onward
From the sixth year, each year accrues 30 days of basic pay instead of 21. Long service is rewarded at the higher rate.
Capped at Two Years' Salary
The total can never exceed 24 months of basic salary, no matter how long the service. In practice the cap only bites after very long tenures.
Worked example: AED 8,000 basic salary, 7 years of service. Daily rate: AED 266.67. First five years: 266.67 × 21 × 5 = AED 28,000. Next two years: 266.67 × 30 × 2 = AED 16,000. Total: AED 44,000. Try your own numbers in the calculator above.
This is the standard statutory formula under the federal labour law. Contracts, free zone rules and individual circumstances can change the outcome, which is why the calculator is an estimate.
Who qualifies
Who gets gratuity in the UAE
The headline rule is simple: one full year of continuous service with the same employer. Leave before a year is up and no gratuity accrues. Cross the one-year mark and the whole period counts, including year one.
It applies to full-time private-sector employees under Federal Decree-Law No. 33 of 2021. Part-time arrangements accrue proportionally, and domestic workers fall under a separate law with its own rules.
Most free zones follow the federal law, but DIFC and ADGM run their own end-of-service savings schemes (DEWS in the DIFC), which work differently from classic gratuity. If your company sits in DIFC or ADGM, check your centre's scheme rather than this formula.
Resignation or termination does not remove the entitlement once the year is complete: under the current law, the 21/30-day formula applies regardless of who ended the contract. Older contracts signed under previous rules may read differently, so check the paperwork.
The detail that matters
What counts as basic salary
Gratuity is calculated on basic salary, not the total package. Allowances for housing, transport and the rest are excluded, which is why how a contract splits salary matters enormously: two employees on AED 15,000 a month can have very different gratuity figures if one has a AED 10,000 basic and the other a AED 6,000 basic.
Commissions and bonuses are generally excluded unless the contract says otherwise. Overtime too. When we review employment contracts for clients, the salary split is one of the first things we check, because it quietly determines the end-of-service liability.
Employer tip: accrue gratuity monthly in your books (roughly one month's basic per year of service at the 21-day rate, adjusted upward later). It turns a nasty surprise at resignation into a planned number. Our payroll service does this automatically, and our WPS payroll guide explains the monthly mechanics.
Getting paid
When gratuity must be paid
The law requires end-of-service benefits to be settled within a short window after employment ends: fourteen days is the figure in the current law. In practice it is paid with the final settlement, meaning outstanding salary, unused leave and gratuity together, after any lawful deductions.
Delays are common, and disputes go to MOHRE. Employers who accrue monthly and process final settlements from a checklist rarely have problems. Employees who have not been paid can file a labour complaint, and the ministry takes end-of-service cases seriously. If payroll admin is eating your time, our payroll outsourcing takes the whole cycle off your hands.
Avoid these
Common gratuity mistakes we see
Most gratuity disputes we encounter come from the same handful of errors, and all of them are avoidable.
- Calculating on total salary instead of basic: including allowances inflates the payout and creates a precedent you cannot unwind. Always use the basic figure from the contract.
- Getting the one-year rule backwards: some employers pay gratuity for 11 months of service out of goodwill, then face claims they have set a precedent; others wrongly deny it just after the year is complete. The line is one full year: know where it is.
- No monthly accrual: a ten-year employee on a AED 12,000 basic represents roughly AED 100,000 of liability. Accruing monthly turns that into a planned number instead of a resignation-day shock.
- Assuming DIFC and ADGM work the same way: they do not. Their savings schemes replace classic gratuity entirely, and applying the federal formula there is simply wrong.
- Undocumented final settlements: every final payment should come with a signed settlement breaking down salary, leave and gratuity. Handshakes do not survive MOHRE disputes.
Our outsourced accounting service builds gratuity accruals, final settlements and WPS runs into one monthly process, so none of this lands on your desk.
Gratuity FAQs
Gratuity questions, answered
How is gratuity calculated in the UAE?
Monthly basic salary divided by 30 gives the daily rate. Multiply by 21 days for each of the first five years of service, and by 30 days for each year beyond five. Cap the total at 24 months of basic salary. One full year of service is required before anything accrues. The calculator above runs this exact formula.
Is gratuity paid on basic salary or total salary?
Basic salary only. Housing, transport and other allowances are excluded, as are commissions and bonuses unless the contract includes them. This is why the basic-versus-allowance split in the employment contract matters so much.
Do employees get gratuity if they resign?
Yes, provided they completed at least one year of continuous service. Under the current federal labour law the same 21/30-day formula applies whether the employee resigned or was terminated. Contracts predating the 2021 law may have different terms, so check the paperwork.
What is the maximum gratuity payable?
Two years of basic salary: 24 times the monthly basic. The cap is statutory, so even decades of service cannot push the figure above it.
When must the employer pay gratuity?
With the final settlement, within the short statutory window after employment ends (fourteen days under the current law). It is typically paid alongside final salary and unused leave encashment, after lawful deductions.
Do free zone employees get gratuity?
Most free zones follow the federal labour law, so yes. The exceptions are DIFC and ADGM, which run their own end-of-service savings schemes instead of classic gratuity. If in doubt, check which regime your employment contract falls under.
Ready when you are
Payroll without the surprises
We run WPS payroll for UAE businesses: monthly runs, gratuity accruals, leave tracking and final settlements done right. Start with a free review of your current setup.
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